Agencies on alert over O2 and Virgin Media mega deal

virgin_o2_1The proposed merger of O2 and Virgin Media – set to be announced later this week – is likely to trigger one of the biggest agency battles for years as the combined operation looks to make cost savings while also ramping up its attack on BT and Sky.

Virgin Media’s CRM account has been handled by Rapp for over a decade, while Adam & Eve DDB scopped the advertising business from BBH last year and OMD UK retained the media brief.

The O2 CRM business has been held by M&C Saatchi (in its former guise as Lida) for nine years but is currently under review, with the AAR holding initial meetings with agencies in March through video-conferencing.

However, last week it was reported that the review has been paused, with sources citing the coronavirus crisis.

The proposed merger is the more likely reason for the delay; the combined entity will not want to rush into a decision to switch agencies – a process that can it itself take months – until its new marketing strategy is sorted, meaning that M&C could hold on to the activity for many months to come.

Meanwhile, VCCP has run O2’s advertising since 2002, and its CRM agency VCCP Me has worked on certain elements of the business in the past. Havas handles media, alongside an in-house division called Team O2.

Liberty Global, which owns Virgin Media, and Telefonica, which owns O2, are set to announce the multibillion-pound merger of their UK businesses on Wednesday alongside Liberty’s first quarter results.

City analysts see it as a re-run of BT’s £12.5bn takeover of EE nearly five years ago. It also combined a fixed line broadband business with a mobile network, with little overlap between the two.

Not that the incumbent agencies always come out on top in such mergers. Wunderman eventually landed the combined BT and EE direct marketing account in a final shoot-out with Proximity London in 2016.

Both incumbents, OgilvyOne, which handled BT and Publicis Chemistry, which ran the EE account, were booted out of the pitch at an earlier stage.

One agency source said: “This review could be make or break for larger agencies, many of whom have been hit hard by Covid-19. It is potentially one of the biggest accounts up for grabs for years. Look what the BT and EE business did for Wunderman? It is no exaggeration to say it propelled them into the biggest agency in the UK; it also gave them the upper hand when it came to the JWT merger, too.

“That won’t be lost on the bosses of all the other major UK agencies, who will want to throw the kitchen sink at this. However, for the ones that miss out, it could be curtains.”

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